By now you may have noticed that there is an all new photo up on the front pages of this magazine to go along with the monthly note there from the Editor-in-Chief. Our previous editor has neither entered the witness protection program nor taken an extended vacation on some sun-soaked beach that has left him visibly more tanned — Ernie Stephens took the helm of the magazine officially back in the closing days of September, but what you are looking at on these pages is the first real issue that bears his full mark and influence. Well, sort-of. Being our Annual Reports Issue, we really hand over the heavy lifting of the edit duties this month to our writers who work directly with industry vendors to create this unique section. It is unique, because it is the one issue every year where we guarantee industry vendors a set amount of space and then we assign one of our own editors to work with each of the companies to create these company profiles and get the 2009 outlook from their top executives. The aim is to provide you an annual update of what these companies accomplished last year, what they have planned for next year or whatever else they think you might find interesting or valuable to know. If participation in this Annual Reports issue is any precursor to the coming year, it is indeed a very good sign — What you see before you on these pages represents a record year for the number of companies taking part in this exercise, and taking advantage of the opportunity to let you know what they see on the horizon. And having read though each of these reports as they were coming in, I can tell you that there truly is a great deal to be excited about in terms of new products and services that will be entering our market in the coming months! Read on to see for yourself!

Randy Jones

Publisher

As we embark on a new year filled with promise and uncertainty, we asked: "What important trends do you see on the horizon that might significantly impact the helicopter market in 2009?"

No one is expecting a repeat of the record sales our industry enjoyed the past two years. 2009 brings major challenges — worldwide economic declines, collapsing oil and natural resource prices and credit strangulation just to name a few; plus there is the real likelihood that the incoming Democratic administration will cut defense spending.

That being said, Precision Heliparts is expecting revenue growth for 2009. In bad times, the strong will get stronger while many of the weaker competitors will get washed out. Our proven business model of Inventory Supported Maintenance Repair and Overhaul (ISMRO) more efficiently meets our customer’s needs allowing us to gain market share. In 2008, we expanded our facilities in the United States and Canada by more than 50%, grew our technical ranks by 20%, made significant investments in inventory — particularly for Sikorsky, and expanded our service capabilities.

2008 has been a gut-wrenching reality check for many United States companies. CEO’s blinded by greed and driven by a short-range profit mentality have led their companies into insolvency. Thankfully, our industry has been spared much of this pain, but we will certainly feel the fallout for years to come.

Keystone has invested heavily in upgrading our facilities with state-of-the-art equipment used to train our employees and hone our processes. As the economy recovers, we believe we are positioned to take advantage of opportunities that accompany significant market corrections.

Looking forward, buyers will be even more demanding of value in the form of increased productivity from our products and lower cost of ownership. International competition will continue to put downward pressure on pricing. Companies that have invested wisely during this downturn will have a competitive edge.

This year we expect the defense helicopter market to be steady, given the continued high usage of helicopters by the U.S. Army and allied forces in the War on Terror. The federal budgets are set, and the world situation continues to require involvement of military rotorcraft. The best opportunities for industry are in retrofits where a significant enhancement of performance, cost savings or maintenance can be demonstrated. In addition, we see condition-based maintenance gaining further importance as a readiness enabler for our troops.

On the commercial side, the need for helicopters continues to increase; however, we see the market softening due to worldwide budget constraints on the very diverse customer base including corporations, municipalities, hospitals and newsrooms. The added convenience and access to fast air travel must be weighed against the cost. Industry has an opportunity here to prove its value by innovating and providing tailored service solutions.

"FlightSafety’s Level 7 helicopter FTDs greatly extend our ability to offer essential safety training to a broad cross-section of rotorcraft and for virtually all of today’s major helicopter missions."

Despite the economic downturn, we expect strong demand for rotorcraft training, reflecting the growing recognition that simulator-based instruction is the single most effective way to improve safety. We especially see a big jump in demand for FTD-based simulator training, which provides an efficient and cost-effective strategy to incorporate safety as a key component of overall flight operations.

We predict that our mission-specific training for EMS, offshore, law enforcement and newsgathering will be a significant factor in this growth. This training recognizes the widely different roles for which helicopters are used, preparing crews to anticipate and safely handle a broad range of scenarios.

Offshore oil industry growth should continue as the United States places greater emphasis on energy independence. While our newest Learning Center at Lafayette is part of FlightSafety’s commitment to support the extensive offshore helicopter industry, this new facility will deliver the FlightSafety Advantage to operators engaged in all applications of rotorcraft versatility.

While the helicopter industry is still relatively strong, as it relates to the rest of the aviation industry and the economy as a whole, one can’t ignore the potential impact going forward. Values appear to be holding. Center Capital Corporation is still actively lending to the helicopter industry with a keen eye to the future. We are funded through our parent, Webster Bank. We are considered well-capitalized by Federal regulatory agencies.

"We anticipate continued robust helicopter demand in 2009 from EMS, SAR, law enforcement, military, and marine segments. Responding to ongoing safety concerns, manufacturers and operators will turn increasingly to solutions that will enable safer flight under a variety of challenging weather, terrain, and mission conditions."

To address this need, Cobham Avionics will complete its transition from six individual avionics companies to two Centers of Excellence: Integrated Systems and Communications. The two centers will make it easier for customers to acquire integrated avionics solutions on a variety of platforms, helping them to meet their operational safety objectives. This Cobham Cockpit of avionics includes: synthetic vision flight displays, helicopter TAWS, stability augmentation, emergency location and NVG compatibility, underpinned by an effective partnership with the FAA and industry that is focused on certifying and deploying these technologies.

Cobham Avionics will continue delivering its world leading communications equipment and will commence the U.S. Navy TH-57 cockpit retrofit and key helicopter OEM programs this year.

"Our customers can rest assured, knowing that we are dedicated to their satisfaction."

Offering quality service to their clients and remaining competitive are two of our customers’ major challenges. And yet, the progression of their activity and productivity is linked to a good use of their helicopter fleet and to the support of their engines.

Having been by their side for a long time, Turbomeca is intent on responding to their expectations to help them carry out their objectives.

To better meet the market demands, we opened a new site on American soil: Turbomeca Manufacturing Inc. in North Carolina. This very first production site outside of France is dedicated to turbine parts manufacturing. With Turbomeca USA and Turbomeca Canada, Turbomeca Manufacturing is our third site on the North-American continent.

The company’s repair and overhaul network capacity has also dramatically increased. Its regional units now operate more autonomously, enabling work to be directed where it can be most quickly accomplished.

In recent inquiries conducted by professional magazines, customers attested to an increased level of satisfaction towards Turbomeca. We thank them for this. Naturally, our teams always aim for the best. Our customers can rest assured knowing that we are dedicated to their satisfaction. Our successes and challenges are closely linked.

"If we in the Aerospace Industry ran our business like they do on Wall Street, who would ever set foot in a helicopter?"

I have to admit that we at Aerometals felt the slightest twinge of anxiety, nothing really — barely worth mentioning — when the federal government announced their intention of taking $700 billion from us to bail out those titans of industry from Wall Street who brought the country to its economic knees in a way that surely warms bin Laden’s heart. It behooves us lesser shrimp boat captains of industry to pay attention to the strategies of the titans of industry, so when JP Morgan Stanley decided to become an official "bank" in order to qualify for the handouts, we decided to follow suit. We are thinking of a new corporate name: Bank of Aerometals. It has a nice ring doesn’t it? Sort of redolent of Bank of America.

You have to admit, if we in the aerospace industry ran our business like they do on Wall Street, well who would ever set foot in a helicopter? What do you think of this advertising jingle: PMA parts from Bank of Aerometals – it’s like money in the bank.

Military helicopter usage will remain strong due to operational needs of military services worldwide. The current fleet is aging rapidly, and the need for helicopters with enhanced capability will sustain demand in all size classes. Despite increasing pressure on military budgets, the unique and essential capabilities of helicopters will afford them high priority in many countries.

Civil markets are more exposed to the economic downturn. Even here, however, there is room for optimism. We predict a shift from piston helicopters to light turbines in late 2009 as new types enter the market. In heavier single and twin markets, growth will be sustained via a broad mix of applications and end use.

In summary, Rolls-Royce believes the helicopter market has healthy fundamentals to sustain it through this period of economic uncertainty.

"Optimizing the Supply on Demand as the Helicopter market continues to grow"

The global helicopter market continues to grow; the pace has slowed some due to global economic conditions. OEM’s are experiencing "push-out" on deliveries and fleet operators are experiencing more scrutiny on operations, procedures and safety by the regulatory authorities, especially on the Air Medical/Medi-Vac operators.

Trends that may affect the helicopter market in 2009 come from countries experiencing increased terrorism, piracy, replacement of assets for the US and international forces and demand from nations seeking increases and modernizing of their existing fleets. Offshore Oil & Gas and Air Medical should continue with current levels, while firefighting and hurricane rescue needs remain difficult to project. Supply-Chains may experience pressure in keeping vital components and spares in the pipeline and optimizing the supply on demand will become more important to balancing inventory and cash flows.

Even in these uncertain times, we are still seeing continued growth in the worldwide fire fighting markets. More and more countries are creating formalized fire management policies, which typically includes airborne fire fighting. Certainly Russia, China and parts of the Mediterranean are making great strides in developing organizational and structural responses to the threat of the loss of life and property due to fires. Our mature markets all appear to still be well funded, but we will be looking for any changes that might occur in the future.

The other area of interest in the fire fighting market is the technology advances that are available. Several entities are now fire fighting at night with NVG crews and equipment. More sophistication in door operating systems, faster refill pumps, live data feeds and satellite GPS tracking are just a few of the technologies that are being embraced. There is a lot of excitement and potential in this area.

Finally, we are seeing a revitalization of the agricultural market. Buoyed by higher corn prices that have been driven by the increased demand for biofuels, our long time friends in the agricultural market are generally looking for newer and upgraded equipment or at least overhauling and improving their existing equipment.

As we move into 2009, I believe the state of the economy is beginning to catch up with the helicopter market. It appears budgets are being cut and the amount of disposable income is decreasing. Efficiency and direct operating costs have become very important factors in the number of flight hours companies and individuals are able to operate their aircraft. Flight departments are being forced to find lower cost options to complete the same amount of work while staying within their budgets. I see a movement towards the smaller product lines, like those produced by Schweizer, as a cost-effective solution.

Despite the recession, helicopters remain a strong and vital industry. It has enjoyed solid growth over the past few years and I see no reason why this trend will not continue in 2009. After all, rotorcraft are still needed more than ever for homeland security, military missions, air medical services, charters, and corporate transport. This means ever-more demand for components and instruments to keep these craft flying. When certain products are a must, people find money to buy them.

Since Aviation Instrument Services was founded 32 years ago, our determination to develop a reputation for service excellence has not flagged; in good times or bad. This is why Aviation Instrument Services has grown into a company that sells and exchanges instruments for helicopters and general aviation aircraft, and why we help out by managing consignment sales for our global customers; including the handling of component repairs and overhauls. We’re here for the long haul, as is the helicopter industry.

Air Comm continues to take multi-unit orders for delivery well into 2009 across our product range. To this point, we have seen literally no impact to sales as a result of the slowing economy, and in fact, we grew over 10% in 2008. Air Comm is well positioned across the industry, which helps to smooth out any reduction in activity in individual sectors. For example, we are now selling in quantity our UH-72 Lakota air conditioner system for the LUH program. We also continue to sell over 150 cabin heaters annually on the UH-60A/L Black Hawk. We are now in the final design stages for this system on the new UH-60M. This military activity is well balanced by our civil heater and air conditioner product lines. We continue to see brisk sales to OEM’s, completion/service centers, and operators across the industry. Sales of our Bell 407 products, and our Eurocopter AS-350 air conditioner, have been especially strong. At this point, we’re cautiously optimistic that the helicopter industry can continue to fly below the economic radar for 2009.

The rapidly expanding helicopter market and increased number of flight operations bring into focus pilot and crew safety. At the top of the list of equipment to improve safety of night operations are NVGs, the NVG cockpit, and external aircraft lighting that is compatible with the NVGs. In the rotorcraft industry, our customers in Law Enforcement, EMS, Firefighting, SAR and the US Military comprise most users of aviator NVGs. All NVG users know the safety improvement that NVG aided flight enables. The goggles can now provide an equivalent level of safety during nighttime ops allowing the aircraft to be used on missions around the clock. With many of these pilots and crews out saving lives of individuals every night, NVG is an impressive safety tool for all involved. As NVG ops becomes "the standard" for nighttime flights, Aero Dynamix will continue to evolve as the "best of breed" NVG lighting vendor due to our unique combination of providing the best lighting system quality in the industry in a timely manner that can be properly maintained. Crew safety, mission accomplishment and ensuring that the total life cycle support to the customer are all critical to the success of the rotorcraft industry.

Of course, the economy will be a key factor for us all. The meltdown of the financial system and associated credit crunch has the potential to profoundly affect commercial operators and tax revenue for defense budgets.

OEM capacity and strategic procurement continue to complement Kaman’s ability to offer high quality, reliable and cost-effective engineering and manufacturing support solutions. As a result, our HeliworX operation will continue to expand and grow into new markets.

From a military standpoint, customers have urgent requirements for ship- or land- based maritime helicopters due to piracy and terrorist attacks, such as the one in Mumbai. Multi-mission Seasprite helicopters are the ideal solution.

Finally, emerging requirements from the war in Iraq are driving companies like Kaman to offer solutions, such as the unmanned K-MAX for logistics support and to reduce harm from improvised explosive devices.

Technology-driven companies like BLR Aerospace will benefit from the ongoing strength of the helicopter market. Operators who would like a new helicopter but don’t want to wait may instead choose to improve the performance and handling of their existing aircraft. At the same time, operators who have been negatively affected by the recession are looking for every competitive advantage. Our technology expands the envelope for these operators and helps them achieve maximum return on their capital investments. Hard-working helicopter operators everywhere continue to look to BLR for innovations that boost their performance and their bottom line.

The MQ-8B Fire Scout Vertical Unmanned Aircraft System (VUAS) had a great year in 2008 and is ready to deliver in 2009. We invested in a company-owned vehicle and have been conducting demonstrations as part of an on-going internal research and development effort to reduce risk and solidify requirements for Fire Scout’s multiple radar integration programs. Fire Scout, with its adaptable open architecture, has demonstrated the ability to fly multiple payloads such as radar and electro-optical/infrared sensors. Warfighters demand and deserve precise situational awareness and Fire Scout delivers with broad area surveillance and target-specific full motion video. Already on contract with the U.S. Navy and Army, Fire Scout has many interested U.S. and international military and law enforcement agencies.

Keystone Helicopter

2008 has been a gut-wrenching reality check for many United States companies. CEO’s blinded by greed and driven by a short-range profit mentality have led their companies into insolvency. Thankfully, our industry has been spared much of this pain, but we will certainly feel the fallout for years to come.

Keystone has invested heavily in upgrading our facilities with state-of-the-art equipment used to train our employees and hone our processes. As the economy recovers, we believe we are positioned to take advantage of opportunities that accompany significant market corrections.

Looking forward, buyers will be even more demanding of value in the form of increased productivity from our products and lower cost of ownership. International competition will continue to put downward pressure on pricing. Companies that have invested wisely during this downturn will have a competitive edge.